Motor Injury Insights brings you all the news
from the world of motor accident compensation.
October 2017
In this edition:
Claim farming and ‘compensation touting’ complaints
Analysis of road fatality statistics
NSW’s new scheme, due to commence on 1 December
Premiums and affordability across Australia and New Zealand.
finity.com.au
Motor Injury
Insights
| Motor injury insights | October 2017 02
The claim farmers keep coming!We have previously written about the problem of claim farming – the dramatic impact this practice has had on
the UK motor market in the past 15 years (see 2012 article), and the fact that claim farming practices have been
alive and thriving in Australia for at least the last five years (see April 2017 MII).
Claim farming is big business! Call centres, generally based overseas, spend their days making cold calls to
encourage people to lodge CTP claims. The calls are sometimes targeted to people who are known to have
been in a motor accident (where do they get this information?) and sometimes they are just made at random.
People interested in finding out more are generally referred to a legal practice, and there may also be referrals
for car repairs and/or car hire at inflated prices. In NSW, as in the UK, evidence suggests this practice has been
associated with a sharp rise in claims for minor injuries.
Claim farmers are shameless in their approaches to solicitors – see the excerpt from a recent marketing email
sent to a NSW legal firm. We note that, at least in NSW and Qld, it is illegal for a solicitor to pay referral fees,
but somehow this business model seems to work…
Excerpt from a claim farmer’s marketing email
We are producing over 180 clients per day in the UK… We have started in Australia working with claims
management companies but are now looking to work with solicitors as we are greatly looking to
increase our campaign as we are just scratching the surface and expect to produce over 80 clients per
day within two months as long as we can work with the right firms… Orders are always made the day
before and have to be placed before 5pm to ensure you receive the clients the following day... If you
wish to order 60 clinical negligence clients per day, we will need at least three days’ grace, but you will
receive an increase of 20 clients per day… Our agreement is set up as an internet marketing agreement
for compliance purposes…
| Motor injury insights | October 2017 03
The number of complaints across Australia more than doubled between May 2016 and May 2017.
Importantly, these numbers are only those who bother to report claims touting to the ACCC; we can
only speculate on the total number of people receiving the calls!
Alarmingly, complaints in Qld, WA and SA have more than doubled in the last six months. CTP insurers in
Qld are already seeing higher claim frequencies associated with minor injury claims – it doesn’t take a lot
of imagination to see how this could be linked to increased claim farming activity.
The number of touting complaints in NSW fell in the latest half-year. This may be partly linked to the impact
of the NSW Police Strike Force into CTP fraud (see article on Ravens).
We have previously noted the difficulties faced by insurers in dealing with claim farming – it is time
consuming, costly and often futile to pursue individual claimants for fraud. However, investing time and
effort in challenging exaggerated claims, and ensuring they are not over-compensated, will pay off in the long
term. Concerted efforts by regulators and insurers working together to understand the dimensions of the
problem can help identify key characteristics of suspicious claims. And surely the legal and medical bodies
also have an interest in ensuring ethical behaviour by their members, and should be warning against any
involvement with claim farmers.
FIGURE 1 – CLAIM FARMING COMPLAINTS
Australia-Wide By Jurisdiction
Com
plai
nts
per M
onth
900
800
700
600
500
400
300
200
100
0
Jan
16
Mar
16
May
16
Jul 1
6
Sep
16
Nov
16
Jan
17
Mar
17
May
17
Com
plai
nts
per H
alf-Y
ear
NSW VIC QLD WA SA TAS ACT NT
1,600
1,400
1,200
1,000
800
600
400
200
0
Jun 16 Dec 16 Jun 17
It is fascinating how agile the claim farming business model seems to be. The charts below show the numbers
of complaints about ‘compensation touting’ received by the ACCC – and indicate that when the going gets
tough in one state (NSW), claim farmers can move their focus elsewhere.
| Motor injury insights | October 2017 04
What can we learn from fatality statistics?For people injured in horrific motor accidents, there can be a fine line between surviving with very serious
injuries and succumbing to those injuries. With only small numbers of people suffering severe traumatic
brain or spinal cord injuries as a result of motor accidents, data on motor accident fatalities may
provide information that can help our understanding of trends in lifetime care scheme participants –
for example, what can we learn about the age distribution of potential participants?
Are fatalities increasing?
Nationwide, the numbers of road fatalities steadily decreased to 2014, but in the two years since,
fatalities have increased by 13%. The increase has not, however, been uniform:
• Fatalities have increased for cars, motorcycles and pedestrians, but not bicycles – see Figure 2.
• The movements in fatality numbers vary widely by jurisdiction – see Table 1.
FIGURE 2 – AUSTRALIAN ROAD FATALITIES
Fewer fatalities among the young
For the under 30 age groups, road fatality rates (fatalities as a percentage of the population) have reduced
significantly over the last 10 years. A key reason for the reduction is the introduction of Graduated Licensing
Systems (GLS) for young drivers. In the early 2000s, no Australian jurisdiction had a comprehensive GLS,
but all jurisdictions had some form of GLS by 2014.
The road fatality rate for older age groups (above 55) has remained reasonably stable, and because there
have been fewer fatalities among the young, the older age groups now account for a greater proportion of
total fatalities – increasing from around 20% to 30% (see Figure 4). Furthermore, with the ageing of Australia’s
population, the absolute number of fatalities from older age groups has increased.
TABLE 1 – CHANGE IN FATALITIES: 2014 TO 2016
Num
ber o
f Fat
aliti
es
1,800
1,600
1,400
1,200
1,000
800
600
400
200
02006 2007 2008 2011 20142009 2012 20152010 2013 2016
Car Motorcycle Pedestrian Bicycle
Jurisdiction % Change
NSW 24%
VIC 17%
NT 15%
QLD 13%
TAS 12%
ACT 10%
WA 5%
SA (20%)
Australia 13%
| Motor injury insights | October 2017 05
FIGURE 3 – ROAD FATALITY RATES
FIGURE 4 – AGE MIX OF ROAD FATALITIES
Fata
litie
s pe
r Mill
ion
Peop
le160
140
120
100
80
60
40
20
0
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2006
2006
2007
2007
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
2013
2013
2014
2014
2015
2015
2016
2016
0-14 15-29 30-54 55+
<30 30-54 55+
If the changing age mix of fatalities is reflected in the serious injury (NIIS eligible) statistics, we might expect
to see an increasing proportion of older people in lifetime care schemes. The design and costing of these
schemes has taken a historical view of the experience to estimate potential participants. The last four to five
years’ experience suggests that the age proportions might be different from expectations, with more older
people. If this trend continues, then all else being equal (including the total number of participants remaining
constant), a higher proportion of older age participants in lifetime care schemes should mean lower cost
pressures for these schemes.
Sources:• bitre.gov.au/statistics/safety/fatal_road_crash_database.aspx• roadsafety.transport.nsw.gov.au/downloads/gls.pdf
| Motor injury insights | October 2017 06
Update on Premiums
CTP Premiums around Australia and NZ
Figure 5 summarises the headline CTP premium rates effective 1 July 2017. The amounts include any
loadings relating to Lifetime Care (for those jurisdictions with separate schemes), as well as stamp duty,
GST and other levies. The 2016 rates and the % movement in the year are also shown.
FIGURE 5 – CTP RATES AT JULY 2017: STANDARD MOTOR CAR
The NSW premium is similar to a year ago. Premiums increased during the year, but recent lower
numbers of legally represented minor injury claims prompted premium reductions effective 1 July 2017,
offsetting the mid-year increases. Recent changes in legal cost regulations and fraud mitigation efforts
(see article on Strike Force Ravens) appear to have partially reversed the increasing claim frequency
trend of recent years.
For Queensland, a $16 increase in the NIISQ levy was more than offset by reductions in the ‘CTP component’
of premiums, giving a total reduction in the year of $16.60. In Tasmania, lower scheme claims costs were
passed on to motorists. The NZ premium fell by 13% (which follows reductions of 33% and 41%); favourable
investment returns during 2016/17 resulted in a better than expected funding position.
Of the Australian jurisdictions, Tasmania continues to have the lowest premium, and the ACT the highest.
700
600
500
400
300
200
100
0(2%) 0% 2% 3% (5%) 0% 2% (7%) (13%)
ACT
Third party + lifetime care for catastrophic injuries No-fault
NSW SA WA QLD NT VIC TAS NZ (in NZ$)
Jul 17 Jul 16
| Motor injury insights | October 2017 07
Affordability Index
Figure 6 shows a CTP ‘affordability index’ by jurisdiction (aqua bar). The index expresses the
standard metro car premium shown in Figure 5 as a percentage of average weekly earnings – a
smaller percentage means better affordability. Since the jurisdictions have different benefit regimes,
we can’t draw conclusions about comparative scheme performance from this index. The diamonds
show the affordability index at July 2016.
FIGURE 6 – CTP AFFORDABILITY INDEX AT JULY 2017
Since last year, affordability has improved in most jurisdictions – the exceptions being NSW and WA,
where affordability is largely unchanged. Affordability improved in Qld, Tasmania and NZ, driven by
the premium reductions noted earlier.
Qld now joins WA as the most affordable of the Australian jurisdictions, closely followed by Tasmania.
60%55%50%45%40%35%30%25%20%15%10%5%0%
ACT
Third party + lifetime care for catastrophic injuries No-fault
NSW SA WA QLD NT VIC TAS NZ (in NZ$)
Jul 17 Jul 16
Cla
ss 1
Met
ro P
rem
ium
as
a %
of A
WE
| Motor injury insights | October 2017 08
Jurisdiction RoundupNSW
New CTP scheme commences 1 December
Table 2 summarises some of the key reforms to the NSW CTP scheme. The new scheme sees an overall shift in
focus from common law to statutory benefits.
TABLE 2 – KEY REFORMS TO NSW CTP
Area Observations
Premiums Renewals will start to go out from mid-October, and the Government has been consistently saying that the premium for the average motorist will go down by more than $100.
Motorcycle premiums will not reduce, because of the high cost of adding the ‘at-fault rider’ cover.
Benefits At-fault parties will now be entitled to weekly benefits and medical treatment for up to six months (up from a maximum of $5,000 in the current scheme). Will there be a slow take-up from this group due to lack of awareness?
A key reform was the introduction of a minor injury test. Benefits for ‘not at-fault’ claimants who have minor injuries will be limited to six months, and there will be no access to common law. Draft regulations define an injury as ‘minor’ if:
• It is a soft tissue injury (including neck or spine injuries with non-verifiable radiculopathy), or
• It is a psychological injury diagnosed as acute stress or adjustment disorder only.
The soft tissue distinction between minor and other claims should be reasonably robust, but there is concern about the subjective nature of the psychological injury definition. For example, an adjustment disorder is considered a ‘minor’ injury, and an anxiety disorder is not, and in diagnostic terms there can be grey areas between these.
Transition The Government will give individual refunds to motorists for the portion of already-paid premiums covering the new scheme period. People will start to receive their refunds from January 2018, with priority given to those receiving the greatest amounts (e.g. taxi owners and business fleets).
Insurers are deep into their implementation work. Besides serious IT changes, it is expected that claim management models and culture will change a lot, with the move in focus from common law to statutory benefits.
Dispute Resolution
The details of the new dispute resolution process are also being defined – there will be a compulsory Internal Review by the insurer, and then a comprehensive Dispute Resolution Service which is a division of the regulator, SIRA.
Legal Costs New legal cost regulations are coming (not yet released), and will be important to the involvement of the legal profession. An early version of these regulations introduced in November 2016 seems to have contributed to a significant drop in the numbers of new claims being lodged in the current scheme.
| Motor injury insights | October 2017 09
Premium reductions for all insurers
Figure 7 shows the insurers’ premium rates for ‘model drivers’, ranked from most expensive to cheapest,
at April 2017 and October 2017.
FIGURE 7 – NSW CLASS 1 METRO PREMIUMS
Since April, all insurers have reduced their premiums – in response to the drop in legally represented minor
injury claims. The average premium reduced by $26 or 4%. CIC Allianz remains the most expensive ‘best price’,
and QBE is now the cheapest.
Policies Incepting 16 APRIL 2017
Policies Incepting 1 OCTOBER 2017
Change
CIC-Allianz $673 CIC-Allianz $663 ($10)
NRMA $640 Allianz $611 ($12)
Allianz $623 NRMA $597 ($43)
AAMI $622 AAMI $595 ($27)
QBE $613 GIO $590 ($16)
GIO $606 QBE $587 ($26)
De
cre
asi
ng
pri
ce
16 arrests for CTP fraud
Strike Force Ravens was established in August 2016 to investigate syndicates who have been targeting
the CTP scheme. By mid-September 2017, Ravens investigators had arrested 16 people (the most recent
three involved a solicitor and two men posing as physiotherapists) and laid more than 120 charges in relation
to total fraud of more than $11 million. This may have dampened claim farming activity, contributing to the
recent drops in claim numbers.
| Motor injury insights | October 2017 10
Queensland
The scheme review committee reports back
In 2016, MAIC appointed a committee to review Queensland’s CTP scheme, focussing on affordability,
efficiency and fairness. While the committee’s overall conclusion was that no major reform is needed in
Queensland, it made 19 recommendations to MAIC.
We have identified seven of these recommendations which could be adopted immediately to improve
affordability and efficiency; see Table 3.
TABLE 3 – THE COMMITTEE RECOMMENDS THAT…
Of the remaining recommendations:
• Seven endorse retaining existing scheme features
• Five require further exploration and would involve legislative changes.
Further information can be found on MAIC’s website.
In the context of an environment where there is mounting evidence of claim farming, we query whether the
scheme review has missed the opportunity to proactively strengthen the sustainability, efficiency and fairness
of the current scheme by tackling claim exaggeration and legal involvement in minor injury claims.
1 As a matter of priority, MAIC take action to address the issue of high insurer profits in the scheme.
2 Action be taken to improve consumer awareness of choice of CTP insurer both at renewal and when purchasing a vehicle.
3 Develop appropriate benchmarks to enable enhanced assessment of scheme performance.
4 MAIC implement a legal fee reporting model to allow for greater transparency of scheme efficiency.
5 Areas of overlap and lack of clarity in the current prudential supervision arrangements be eliminated.
6 Insurer performance monitoring, benchmarking and reporting be strengthened.
7 Information on scheme trends and performance be made more readily available to all stakeholders.
| Motor injury insights | October 2017 11
Evidence of claim farming?
The numbers of new claim reports have continued to increase in the past 12 months, driven by low severity
legally represented claims. Figure 8 shows the number of reports by quarter.
FIGURE 8 – QLD CTP CLAIM REPORTS
Small reduction in the ceiling price
Effective 1 July 2017, MAIC reduced the
Class 1 ceiling premium by just $0.60 to
$352.00. This was the net impact of:
• A $16 increase in the NIISQ levy
(from $69 to $85)
• A $16.60 decrease in the
‘CTP component’ of the premium
(from $283.60 to $267.00).
The four insurers have continued
to file at the ceiling price.
These latest changes mean that over
the year to July 2017, the total Class 1
premium has reduced by $16.60
(as shown earlier in Figure 5). The
reduction is greater however, in the
component of the premium that the
insurers retain (i.e. excluding all levies);
that component has reduced by
$30 or 12%.
A case for lifetime care?
Alan was 14 when he was in a car accident that resulted in
a very severe brain injury, and he now needs 24 hour care.
Alan’s CTP claim against the driver was rejected in the
Queensland Supreme Court. Why?
Alan was out with three teenage friends when they decided
to steal a car for a joyride. Alan was in the front passenger
seat, a 16-year-old was driving, and another two friends
were in the back seat. They had driven less than a kilometre
when the driver lost control at a corner and hit a light pole.
None of the boys was wearing a seatbelt.
In 2013, when Alan’s injury occurred, the Queensland CTP
scheme was purely fault-based. The judge said the boys
were involved together in a criminal activity and that the driver
did not owe any duty of care to Alan – ‘do not pass GO!’
Had Alan’s accident occurred today, he would still have
no entitlement to a common law claim, but he would be
covered by the lifetime care scheme in Queensland (NIISQ),
providing treatment and care for the remainder of his life.
Captain v Wosomo & Anor [2017] QSC 86
Analysis of the delays between accidents and claim reporting suggests that claim farming activity
may be driving some of the higher claim numbers.
2,500
2,250
2,000
1,750
1,500
1,250
1,000
750
500
250
0
Sep
13
Dec
13
Mar
14
Mar
15
Mar
16
Jun
14
Jun
15
Jun
16
Sep
14
Sep
15
Sep
16
Mar
17
Dec
14
Dec
15
Dec
16
Jun
17
Cla
ims
Rep
orte
d
Report QuarterClaims Yearly Average
| Motor injury insights | October 2017 12
Australian Capital Territory
A citizens’ jury to improve CTP
The ACT Government has announced its first citizens’ jury to explore possible improvements to the CTP
scheme. Despite paying comparatively high premiums (see Figure 5), Canberrans often have to wait at least
two years before being paid out, and many injured drivers are not even covered by the scheme (e.g. the
oft-quoted kangaroo-hitting driver, where fault cannot be proven).
In this ‘deliberative democracy’ process, a representative jury of 50 Canberrans will identify the key
priorities of a CTP scheme, balancing the interests of all road users. The jury will be supported by a
Stakeholder Reference Group (legal representatives, healthcare providers, consumers, Government officials,
actuaries and scheme design experts), who will formulate and cost a number of scheme options. The jury
will reconvene in late March 2018 to determine which option best meets the identified priorities.
The jury’s preferred option, which the Government has committed to pursuing, is expected to be
announced in the September quarter of 2018.
Premiums continue to fall
Figure 9 shows the recent history of premiums charged for Class 1 passenger vehicles in the ACT.
Since our April 2017 edition, all insurers bar GIO have reduced their premiums.
FIGURE 9 – ACT PREMIUMS: PRIVATE USE PASSENGER VEHICLE
NRMA
Priv
ate
Pass
enge
r Veh
icle
Pre
miu
m ($
)
580
570
560
550
540
530
520
AAMI
APIA
GIO
May
16
Jun
16
Jul 1
6
Aug
16
Sep
16
Oct
16
Nov
16
Dec
16
Jan
17
Feb
17
Mar
17
Apr
17
May
17
Jun
17
Jul 1
7
Aug
17
Sep
17
Oct
17
Nov
17
| Motor injury insights | October 2017 13
South Australia
The transition to a competitive scheme continues
The SA scheme is currently just over a year into a three year transition phase, during which premiums
of the four approved insurers are set to increase by 3% per annum. From 1 July 2019, the market will be
opened to competition, with approved insurers able to compete on price and other value-adds.
The CTP Insurance Regulator is currently working through several proposals for the insurer and pricing
arrangements after transition, drawing on experience in other jurisdictions in Australia and overseas.
These proposals are expected to be announced in the coming months.
Tasmania
Review of MAIB’s pricing policies
The Office of the Tasmanian Economic Regulator recently completed a review of the motor injury
insurance pricing policies of the Motor Accidents Insurance Board (MAIB). Overall, the results were
uncontroversial. The recommendations to the Tasmanian Government included:
• No indexation of premiums for the 2017/18 year
• For the subsequent three premium years, indexation of premiums should not exceed Average
Weekly Ordinary Time Earnings
• A new vehicle class should be created for ride sourcing vehicles, with an initial premium relativity
of 1.00 and the same recommended maximum premium as Class 1 vehicles.
Various other changes to premium relativities were recommended, to be phased in over four years.
| Motor injury insights | October 2017 14
Western Australia
First year results for WA’s lifetime care scheme
WA’s Catastrophic Injuries Support (CIS) scheme commenced on 1 July 2016, providing lifetime care and
support to people catastrophically injured in motor accidents where fault cannot be attributed to another
driver. Where fault can be attributed, claimants remain within the existing CTP scheme, though they can
elect to have their treatment and care funded by periodic payments.
By 30 June 2017, 48 injured people had been assessed as having catastrophic injuries, with a further
13 undergoing eligibility assessment. Figure 10 summarises information on the 48 participants/claimants.
FIGURE 10 – CHARACTERISTICS OF 2016/17’S 48 PARTICIPANTS/CLAIMANTS
75% Male
25% Female
58% CIS Scheme
42% CTP Scheme
69% Traumatic Brain Injury
29% Spinal Injury 2% Other
Gender Scheme Injury Type
Age Band12
10
8
6
4
2
00-14 15-24 25-34 35-44 45-54 55-64 65+
Num
ber o
f Par
ticip
ants
Overall, fewer people have been
catastrophically injured on WA roads
than expected in the first year, though
they have been younger and more
severely injured than expectations.
ICWA cracks down on fraud
Following a rear-end collision in September 2015, an
individual reporting neck, shoulder and knee injuries
lodged a CTP claim. The claim was investigated by the
Insurance Commission of WA (ICWA) after fraud indicators
highlighted areas of suspicion. After pleading guilty in
June 2017 to two offences relating to providing false or
misleading information, the claimant was fined, ordered to
pay legal costs and a criminal conviction was recorded.
| Motor injury insights | October 2017 15
John Jeaitani
+61 2 8252 3316
Sydney Office
Kane Boulton +61 2 8252 3348
Sydney Office
Contact the author
AUSTRALIA
Sydney
Level 7, 68 Harrington StreetThe Rocks NSW 2000+61 2 8252 3300
Melbourne
Level 3, 30 Collins StreetMelbourne VIC 3000
+61 3 8080 0900
Adelaide
Level 30, Westpac House 91 King William Street Adelaide SA 5000+61 8 8233 5817
NEW ZEALAND
Auckland
Level 5, 79 Queen Street Auckland 1010+64 9 306 7700
Finity’s Motor Injury TeamFinity’s motor injury team prides itself on looking beyond the pure
analytics to gain a deeper understanding of the cost drivers for schemes.
This means we can respond appropriately in valuations, premium setting
and scheme design.
In addition to our actuaries, Finity has a dedicated group of claims and
operational insurance experts in our management consulting practice,
who can assist with claims and expense management.
If you would like to receive future editions of Motor Injury Insights,
please contact Rebecca Dalleywater on +61 2 8252 3458 or at
This article does not constitute either actuarial or investment advice. While Finity has taken reasonable care in compiling the information presented, Finity does not warrant that the information is correct.
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